Check this reddit comment: http://www.reddit.com/r/Economics/comments/co1q6/chinas_banks_now_biggest_in_world_with_lots_of/c0ty9mj
This is the kind of nonsense that is going arround. Some people is believing this bullshit.
I think the austrians are sleeping because of the success and growth at the beggining of the crisis, but now some wacko theories are starting to grow.
pressure to redeem notes in base money as a natural limit to the extension of fiduciary media.
Again, why put limits on something which austrians recognize to be an evil: the unequal and undeserved benefits or ‘extending’ the supply of money?
Why not instead abolish the harm?
My own main personal objection to the Federal Reserve System is that a class of aristocrats connected to the Fed gets a free lunch by extending the money supply at their discretion, and those closest to them who have first access to the new money get the greatest benefit, while those furthest away from money creation are the most harmed, by having their purchasing power decreased.
If gold-owning aristocrats instead created new money, albeit on a more limited basis, what jumps out at me is that in either case, aristocrats are extending the money supply for personal gain and possibly at general harm, though inflation.
I’m against aristocrats getting a free lunch, whether it’s a ‘limited’ or ‘unlimited’ free lunch, and I don’t see how anyone could argue that writing ink on paper and having others accept it as gold is not a free lunch.
Ravochol,
Again, why put limits on something which austrians recognize to be an evil: the unequal and undeserved benefits or ‘extending’ the supply of money?
While I don’t want to start a major argument between 100-percent reservists and free-bankers, because we’ve had these before, I’m not convinced that extending the supply of money is always bad. On the other hand, I am convinced that reducing the supply of money is bad. The theory is maintaining equilibrium (understanding that equilibrium is impossible, however) between supply and demand for money, which means that the supply of fiduciary media will tend to fluctuate over time.
Why not instead abolish it?
How would a libertarian go about abolishing fiduciary media or fractional-reserve banking, other than through experience and consumer demand? And, if we abolish fractional-reserve banking, then where is the threat posed by money substitutes? You argue that having money substitutes, such as paper notes, would be inherently dangerous, since it would give way to fractional-reserve banking, but if it’s abolished then this “inherent danger” is obviously non-existent.
My own main personal objection to the Federal Reserve System is that a class of aristocrats connected to the Fed gets a free lunch by extending the money supply at their discretion, and those closest to them who have first access to the new money get the greatest benefit, while those furthest away from money creation are the most harmed.
Take note that both of us would like to abolish the Federal Reserve System, which is nothing more than the cartelization of the banking industry. Furthermore, I think both of us would like to see competition in currency.
If gold-owning aristocrats instead created new money, albeit on a more limited basis, what jumps out at me is that in either case, aristocrats are extending the money supply for personal gain and possibly at general loss, though inflation.
To be specific, banks would be extending the supply of money. Also, a currency’s success would be based on how well it satisfied consumer demand, and so ultimately the benefits will have to be felt by the consumers as much as it will have to be felt by those in control of that particular currency.
I’m against aristocrats getting a free lunch, whether it’s a ‘limited’ or ‘unlimited’ free lunch, and I don’t see how anyone could argue that writing ink on paper and having others accept it as gold is not a free lunch.
This seems like a non-sequitor. Money substitutes are not necessarily fiduciary media.
But this effect is only true if the system is inflationary. If the system is not inflationary then it does not happen and this is a non issue. A unregulated fractional reserve system or a not corrupted gold standard are not inflationary so this would not happen.
And again, the bigger problem of inflation is that it creates bubbles that distorts the productive industry.